¶ … cumulative profit over the period 2012-2015 was $1,667,307,322, lower than the highest score obtained of $2,100,000,000. The period during which the simulation was performed can be divided into two separate periods. During the first two-year, tablet X5 was the main performer in terms of profitability and market share, this reflecting the fact that the product was in its growth period.
As decision was made to gradually reallocate research and development funds towards tablets X6 and X7, the revenues for X5 decreased and the tablet was eventually discontinued in the last year. Tablet X6 began to be the primary revenue contributor, while tablet X7, more complex in terms of the targeted consumer, slowly built its market share.
The strategy applied in the simulation was based on several factors, including the product cycles that affected the amount of spending on research and development and the pricing strategy that was applied. In the first years, the revenue generator is product X5, already established on the market. There are several advantages of product X5 in this initial stage, including the fact that it is priced lower than its competitors and that it is still in its growth phase. The initial decision was to reduce research and development spending for X5 (20% of the budget), while developing more X6 and X7 (40% each).
This decision was partly correct, with the exception that it ignored evidence that the performance of product X6 was already considered better than that of competing tablets. This would have probably implied that...
With the decision that was made, the future sales for X5 were slightly affected.
In terms of the pricing strategy, the price for X5 was kept at the same levels, while the price for X7 was slightly decreased. This proposed a penetration strategy for this product, which still had a very low market share, but a potential to grow over the next years. At the same time, the decision also considered the fact that the customer profile for product X7 showed that customers were both performance and price sensitive.
In terms of research and development investment, during the first two years, the strategy used followed the same guidelines, notably keeping research and development costs down for X5 and investing in research and development for X6 and X7.
In terms of the pricing strategy, the market review showed, after the first two years, that the X6 was priced lower than the tablets of other competitors, which prompted an increase in the price of X6. The price of X5 was lowered after the first two years, notably to mark the fact that the product was now no longer in the growth phase and that interest for the product was beginning to decrease. With X7, after the initial market penetration strategy, the priced was increased gradually to reflect more the new phase in which the product was.
Another important decision made was to discontinue…
